Whilst many of us were baking in in the sunshine on bank holiday Monday, the Berlin Senate cooked up its freeze for residential rents in Germany’s capital. That rocked the sector on Monday, neutered by a dead cat bounce yesterday, and steady today. We make a few observations and highlight Vonovia:
- This is a draft proposal and it has been drawn up by one of the most strident advocates of rent control in Berlin (Senator Katrin Lompscher, Die Linke), so it should come as no surprise that it contains the strongest elements of rent control and even an absolute cap on rents that could be applied retrospectively. In other words tenants could apply for a rebate. And it is linked in some way to the age of the building which is complete nonsense and takes no account of refurbishment capex. Not only is this nonsense, it’s also against Federal law.
- So the proposed legislation is still being “negotiated” which will most likely continue through to the last day before it is put in front of the Berlin Senate on 15th October. Right now push for the most aggressive terms, but expect them to be watered down over the next month and a half. Saying it’s more severe than expected is an overreaction.
- This is primarily about politics and how to get re-elected, especially for Die Linke in Berlin – the only noteworthy stronghold it has in Germany. Others in the Senate have already asked for Lompscher to resign. But there’s no doubt we must expect this legislation to go ahead, albeit watered down from the draft proposal sent to the press on Monday.
Secondly let’s look at Vonovia: